 |
These days, it’s not uncommon for someone to lose their job without any prior warning. The financial strain of job loss is hard to deal with, and, if you find yourself in this situation, you may reach a point where making your next car payment is financially impossible. What should you do if you find yourself in this situation?
The first thing to remember is that you should not ignore the problem. If you ignore your car payment and do nothing, your credit score could be significantly lowered. Instead, exhaust these options before you let nonpayment of your car loan negatively affect your credit report.
• As soon as you’re aware that you will not be able to make your car payment, contact your lender. You will need to explain your financial situation in detail, as the lender will want to know why you are having trouble making a payment. You may be able to negotiate a later payment date or a temporarily smaller payment amount.
• If you have a family member that could afford to pay off your loan, you could transfer the title to them and have them make the payments instead of you. Keep in mind that this would mean that your family member would have to qualify for financing or have enough money available to pay your loan balance in full, and that they would be the new owner of your vehicle.
• After your payment is severely overdue, your car may be repossessed by the lender. If this happens, the vehicle will be sold at auction, and you will still be responsible for any amount owed over the selling price of the vehicle. You want to avoid repossession, as it damages credit and leaves you with a bill to pay and no car to show for it.
• If you can determine a way to commute without a vehicle, consider selling your vehicle to pay the balance of your loan. You’ll have to determine if your car is worth enough to pay the balance before selling. If it is, this may the best way to avoid damage to your credit.
In these difficult financial times, many people are faced with the possibility of not being able to afford their car payment. If you find yourself in this situation, make the lender aware of the issue and do what you can to avoid a negative impact to your credit score.
